In today's slowing economy, e-tailers are having to work
tirelessly to get their businesses' names out in front of
potential customers. Many are now experimenting with the
controversial strategy of paid placement on search engines. Sounds
good in theory-who wouldn't want a secure spot in the lead
position in search results?-but with a few consumer groups crying
foul, some entrepreneurs are wondering whether paid placement is
really worth it.

Generally speaking, paid placement means a company pays a fee to
a search engine to guarantee that links to its Web site will appear
in the first few listings of relevant search results. Pioneered by
GoTo.com, the strategy sidesteps the traditional way companies earn
listings-by submitting their URLs and the categories they'd
like to be listed in to search engines, along with a small fee.The
search engines then place the listings in the directory based on
unbiased standards-such as the autonomous groupings of editors or
the results from software programs designed to rank related
sites-with the most popular appearing first. In some cases,
entrepreneurs even pay consultants to help their Web sites get
higher rankings.

This objective approach is still being used, but an increasing
number of companies are discovering the benefits of paying for
placement. According to Danny Sullivan, editor of Search Engine
Watch, an online newsletter, "Paid placement on search
engines offers an incredibly easy way to gain very targeted
traffic."

Getting Started

One of the most cost-efficient ways to pay for placement is to
sign up with a company that provides search results to other sites,
such as GoTo.com or FindWhat.com. Advertisers on such sites bid for
placement in search results based on their chosen keywords. Their
bids are based on the amount the advertisers will pay each time a
customer clicks on their listings in the results from a search
engine that uses one of the companies' listings.

While prices are based on bids, listings can run between 1 cent
and $10 per lead, with an average of about 16 cents per lead. Both
GoTo.com and FindWhat.com also charge minimum monthly fees. Costs
usually correspond to the popularity of terms and where
entrepreneurs want their results positioned. For example, if an
entrepreneur chooses a very popular term that will likely create a
lot of clicks-such as "Viagra"-it will probably cost
several dollars per click to be listed first. However, being tops
under a less popular term, such as "aspirin," might cost
just 10 to 15 cents per click. You can save even more money if
you're content with being listed No. 5 under
"aspirin"-which may cost about 5 cents per click.

Another paid-placement option is to work directly with search
engines. Yahoo!, for one, now leads off its search results with
five paid spots. Google also features sponsored links-but styles
them to resemble paid advertising. In addition, Excite has its own
internal program that supplement listings from FindWhat.com, as
does AltaVista with GoTo.com.

Experts say companies that provide listings to search engines
are the best bet for entrepreneurs, because the search engines are
themselves likely to charge higher monthly minimum fees and involve
ad reps. Plus, with a listings provider, your site shows up in many
places on the Internet. GoTo.com, for example, claims its listings reach
nearly 75 percent of the total U.S. Internet audience.

Behind the Controversy

Not everyone, though, is happy with paid-placement arrangements.
Commercial Alert, for example, a Portland, Oregon-based national
nonprofit anticommercialism group, filed a deceptive advertising
complaint with the FTC earlier this year against eight search
engines for placing ads in their results without clearly indicating
that they were indeed ads. "[They] look like information from
an objective database selected by an objective algorithm. But
really they are paid ads in disguise," the complaint
states.

Named in the complaint are seven search-engine owners:
AltaVista, AOL Time Warner, Direct Hit Technologies, iWon,
LookSmart, Microsoft and Terra Lycos. Some of those companies'
search sites refer to their paid links as "Featured
Sites," as opposed to "Sponsored Sites."

"These search engines have chosen crass commercialism over
editorial integrity," says Gary Ruskin, executive director of
Commercial Alert. "We are asking the FTC to make sure that no
one is tricked by the search engines' descent into commercial
deception. If they are going to stuff ads into search results, they
should be required to say that the ads are ads."

Ruskin says that by concealing the fact that such listings are
really just ads, search engines appear to be violating the federal
prohibition against deceptive acts or practices. This omission
falls within a line of deceptive advertising cases, in which the
FTC sought sanctions against companies caught hiding the fact that
ads were ads.

Ruskin says not all search engine companies have adopted
deceptive advertising practices. For example, Google clearly notes
that its paid placements are "Sponsored Links," and it
will not place paid ads within its search results.

Obviously, though, search engine companies believe their
listings are labeled clearly enough-and they haven't stopped
their paid placement practices. But in the opinion of industry
expert Sullivan, "Some of the [search engines] could use less
ambiguous language."

For now anyway, paid placement-even the kind not labeled as
such-is still a legal way to promote your business. Should you use
the technique? It's up to you.

Melissa Campanelli is a marketing and technology writer in
Brooklyn, New York.